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America's Wine Industry Is Feeling the Effects of Recent Tariffs

www.foodandwine.com by Mike Pomranz 23/08/2019  

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President Donald Trump says he never drinks wine, but he certainly hasn't abstained from making — and continually speculating on — policies that seriously affect the wine industry. Over the weekend, two new stories emerged suggesting that the Trump administration's impact on American wine is far from over.

On Saturday, Bloomberg reported that two sources told the financial site that the president tossed out the idea of adding a duty on French wine as high 100 percent during a fundraiser on Long Island earlier in the month. The price-doubling tariff was apparently proposed as retaliation for France's plan to add a 3 percent tax on the revenues of American tech companies like Facebook and Amazon. Though Bloomberg wrote that it was unclear if Trump "was being totally serious," the site suggests we should have more clarity on what will be happening after August 26 when trade chief Robert Lighthizer is expected to make his recommendations.

Then, yesterday, an article in the Los Angeles Times attempted to show just how serious all of these so-called trade wars can be for the American wine business. For some Californian producers looking to boost business by selling to China, the tariffs already imposed by the Trump administration and — more specifically — the retaliatory tariffs enacted by China have proved disastrous. The paper reports that American bottles heading to China are now hit with a 93 percent surcharge, double what is added to French wine and well over three times the surcharge on Chilean and Australian wines. American wine exports to China were close to $1.5 billion last year, but this year, they are down a third from where they were in 2017, the Times reports.

In theory, these two policies could work in tandem: French wine is too expensive to buy in America, and American wine is too expensive to sell in China, so sell the American wine to Americans to solve both problems. Except that kind of protectionism can be shortsighted. "Twenty years from now, China could be the largest wine market in the world," Hank Wetzel of Alexander Valley Vineyards told the L.A. Times. "We want to be ready." Wetzel also admitted he voted for Trump, though he seemed to be rethinking that decision. "I hate to think our investment is all dashed because of this trade war. But if it is, we'll try again in five or 10 years. I hope this will pass sooner or later," he later stated — potentially with a newfound clarity at how he could help next time around.